Late on an April evening in 2010, agents with the Federal Bureau of Investigation broke into a medical clinic in Bath Beach, Brooklyn, an area popular with Russian immigrants. Once inside, they installed a hidden camera in an air-conditioning vent in the ceiling directly above a desk.

Over the next six weeks, the camera recorded a blonde-haired woman stuffing envelopes with $100 bills, which she handed to elderly patients. In exchange, patients handed over their Medicare identification number, which Bay Medical used to bill for services that the patients would often never receive. If there were any doubts about the legality of the scheme, Bay Medical kept a Soviet-era poster pinned to the wall showing a woman with her finger pressed against her lips and a simple message in Russian: “Don’t Gossip.”

Bay Medical fleeced Medicare, the US taxpayer-funded healthcare programme for the elderly and disabled, for $50m in illegal payments, US authorities later proved. Its employees used the proceeds of the fraud to splurge on plastic surgery, luxury cars and vacations.

Fraudulent billings are estimated to make up as much as 10 per cent of Medicare spending in the US, according to the most recent study. Medicare, which funds hospital visits, prescription drugs and other services for retirees and the disabled, paid over $600bn to provide medical services to 51m Americans in 2013, according to the US Government.

Though still in start-up mode, US investigators’ embrace of big data analysis could save taxpayers billions of dollars a year from healthcare fraud alone. Ultimately, the US Department of Justice hopes to adapt these tactics to crack down on other forms of fraud.

The DoJ says the scheme is already paying off. For every dollar spent to combat healthcare fraud, the US government has collected $8 in recoveries from forfeiture, asset seizures and fines, amounting to $4.3bn in 2013 and a total of $19.2bn over five years.

Data Mining Questions

Why does fraud take years to prove? And why the slow start?

Data mining was launched as an experiment in 2007 in Miami, a hotbed of healthcare fraud. The DoJ, the FBI and the Department of Health and Human Services’ office of inspector-general wanted to see if data could be as good as a human at rooting out fraudsters. “You might see one medical equipment provider getting referrals for 500 wheelchairs from the same doctor, or a home health agency that’s getting 60 per cent of its referrals from the same doctor,” says Leslie Caldwell, chief of the DoJ’s criminal division. “A lot of this can be gleaned from the data.”

That paragraph belongs in the "duh?" category. Nonetheless, Leslie Caldwell, chief of the DoJ’s criminal division claims "The idea of using real-time data to generate fraud cases is unique," she said.

Unique to whom? Google uses real-time data every second to deliver ads. One might not expect Government to react so fast, but what we have seen so far is glacial.

What About Disability Fraud?

And what about other types of fraud? I have written about disability fraud at least a dozen times. Here are a few key samples.

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